State revenue projections increase

Three-year trend of downward revisions reverses

September 16, 2010|By Annie Linskey, The Baltimore Sun

A panel of the state's fiscal leaders said Thursday that the government will have more money than legislators expected when they approved the state's spending plan, reversing a nearly three-year trend of downward revisions because of plummeting tax revenues.

The projected $89 million increase is not enough to rescind hundreds of millions of dollars in cuts made to programs during the 2010 legislative session. But leaders said that when it is combined with the $180 million in extra revenue reported last month from the fiscal year that ended in June, it indicates that the economy is improving.

"It's one more sign that our economy is coming back," said Gov. Martin O'Malley, a Democrat. "It means the gap from this recession will be lower than projected, and that's good news."

The Board of Revenue Estimates made the new numbers public on Thursday. They are intended to give the administration a gauge of whether it can continue current spending and a guide for next year's budget. The board also estimated that next year's general fund level would be $13.6 billion — about $50 million higher than members had assumed in March.

Last year at this time, the same board projected a $920 million reduction, which necessitated a spate of unpopular midyear cuts. But the tone Thursday was different.

"It is certainly good news when we don't have to talk about once again going back to the drawing board to look at decreased revenues," Budget Secretary T. Eloise Foster said.

Much of the increase came from rosier predictions for individual income tax receipts. The state expects to take in an extra $68 million in part from the anticipated arrival of 21,400 jobs related to military base realignment.

Not all the news was good. The state is collecting less money then expected from wealthy taxpayers, who saw a hike in their rates after the 2007 special session. The state also expects the housing market to remain sluggish and capital gains revenues to be lower than expected.

The rosier revenue projection was met with enthusiasm by the largest state workers' union. Patrick Moran, director of AFSCME Maryland, said he would ask O'Malley to roll back the furlough program and lift a hiring freeze — two cost-saving measures that have been unpopular with the union's 30,000 members.

"We'll be pushing to end furlough," he said. "Staff is desperately needed in a number of the agencies. People are doing more with less."

Local governments have also taken a hit, with the state keeping money it normally sends to the counties to fix roads. But Maryland Association of Counties executive director Michael Sanderson did not sound optimistic that the new projections would provide immediate local relief.

With the state still looking at a projected deficit next year, he said he would prefer to "play defense" and prevent deeper future cuts.

O'Malley would not commit Thursday to returning money to state workers or counties, saying only that he "hopes" he will be able to do so.

"The last things we cut are the first things that we'll restore," he said. "The revenues just came out today, and I'm in the middle of working on the budget" for next year, he said.

The revised numbers will likely soften next year's projected deficit, but fiscal leaders cautioned that the expected funding gap has not been erased.

"We are still facing serious economic challenges," state Treasurer Nancy Kopp said. She predicted that the state will need extra funds to "meet our bottom line of necessary expenditures" in the coming year.